Southwestern Law denies lawsuit could drive it into bankruptcy

Southwestern Law School denied Tuesday that it would go bankrupt if a jury awards even a fraction of the $25 million in damages demanded by plaintiffs in a personal injury and landlord-tenant dispute, saying the school's attorneys had added the bankruptcy reference after school leaders had already signed off on a filing that did not contain it.

The statement was in the law school's opposition to the plaintiffs' motion for preferential trial setting and was signed by Justin H. Sanders of Sanders Roberts LLP and filed on Nov. 30. However, a notice of errata was filed on Monday, which deleted the reference to bankruptcy.

"Concerning the original, erroneous filing, our attorneys added the sentence regarding bankruptcy after Southwestern leadership had reviewed the document. Upon learning of that statement, which was inaccurate, Southwestern worked with counsel to file an amended response early on December 4," the law school's spokesman, Steven Lopez, wrote in an email Tuesday.

"Southwestern Law School is confident the current case will not culminate in bankruptcy. Even if a judgment were entered against Southwestern, the school has resources, including resources unrelated to our academic programs, that could be used to satisfy the judgment. Our solid financial position, prudent management practices, and long-term planning underscore our resilience in the face of challenges. We want to assure our stakeholders, including students, faculty, staff, alumni, and donors, that we are and will remain financially stable," Lopez wrote.

The lawsuit was brought by four former tenants of an apartment rented from the school. They claim it was neglected, leading to the lead poisoning of a toddler in the family who will need lifetime care.

"The School is a non-profit educational institution, and Plaintiffs are seeking in excess of $25 million dollars in economic and non-economic damages, plus attorneys' fees and punitive damages," the law school's opposition brief now states in the introduction. "If Plaintiffs prevail at trial, the School will undoubtedly appeal," it adds. The reference to the appeal replaces the sentence that previously read: "If a jury were to award plaintiffs even a fraction of that, the school would go bankrupt."

The law school opposes what it calls a rush to litigation.

The plaintiffs' attorney, Grant K. Riley of Riley Ersoff LLP, said that childhood lead poisoning can cause a host of medical issues, including brain damage, long-term heart problems and early onset dementia.

"The lead-poisoned child in this case will require a lifetime of medical care, therapeutic intervention, occupational care and, in all likelihood, supervised assisted living. Unfortunately, given the cost of medical care in this day and age, plaintiffs will be presenting a life care plan to the jury which will be equal to or exceed $25M," Riley wrote.

Lopez, chief communication officer for the school, emphasized in an email Monday, "While we understand the desire for a swift resolution, a rushed trial would severely jeopardize our ability to present a robust defense at trial and on appeal. Given the large damages plaintiffs are claiming and the school's status as a non-profit institution, this case is quite consequential and should not be rushed to trial in 120 days."

Riley said in an email Monday, "Southwestern ignores the fact that the parties have been attempting to mediate plaintiffs' claims since June 2023. During the course of the parties' mediation efforts, [the lead plaintiff] provided Southwestern with more than 3,500 pages of lead-inspection reports, medical records and other documents which proves the scope and extent of Southwestern's negligence," Riley wrote.

He added, "Mere inconvenience to the court or to other litigants is irrelevant . . . failure to complete discovery or other pretrial matters does not affect the absolute substantive right to trial preference."

Southwestern contends that the plaintiffs' motion is defective on its merits and violates the school's constitutional due process rights. It emphasizes that the plaintiffs do not have a substantial interest in the case because they no longer live in the apartment from which the lawsuit stems.

The filing also says that there is not enough time to develop affirmative defenses if trial is set on or before April 11, 2024, given the volume of documents that need to be analyzed and the number of people who need to be deposed.

"The search for potentially relevant documents is still progressing; however, multiple attorneys are presently reviewing approximately 100,000 documents, which grows in total daily. The school is represented by two law firms (Lynberg & Watkins and Sanders Roberts) and has appropriately assigned six attorneys and five paralegals including a designated e-Discovery paralegal, to this case," Sanders wrote.

"The School has identified a second universe of documents that predate 2004 and relate to [the apartment building]. That collection amounts to over 1,000,000 pages and even with this aggressively robust staffing, and even if this was the only case on counsels' desks (it is not), a preliminary review of those documents could conservatively take over 6 months and would cost approximately $1,900,000," Sanders continued.

Riley sued Southwestern on behalf of Carina Castaneda; her mother, Maria Jesus Salazar Garcia, and her two minor children with claims that Southwestern allowed the property at 666 Shatto Place in Los Angeles to deteriorate to the point that it was covered in lead-based paint chips, infested by cockroaches and damaged by water leaks. The complaint also names property management companies Charles Dunn Real Estate Services and Beach Front Property Management Inc. Carina Castaneda, et al. v. Southwestern Law School, et al., 23STCV23325, (L.A. Super. Ct., filed Sept. 26, 2023).

Riley filed a motion for preferential trial setting one month later on behalf of the minors.

"[Code of Civil Procedure] 36 (a) (b) and (f) require mandatory trial setting within 120 days of the hearing on a Motion for Trial Preference in cases involving (i) personal injuries to minor child, (ii) who is under 14 years of age, (iii) unless the Court finds that the minor child does not have a 'substantial interest in the outcome of the case as a whole.' However, unlike cases involving plaintiffs over 70 or those facing imminent death, Section 36(b) does not require a showing of actual harm," Riley wrote.

Southwestern's spokesman, Lopez, told the Daily Journal in September that the school has relocated the plaintiffs, started a lead abatement program and retained a general contractor to inspect and renovate the units and common areas.

Southwestern purchased affordable residential apartment buildings near campus between 1989 and 2010, and contracted management to an outside property management company, Lopez's statement said. Southwestern has since terminated its previous property management company and brought in a company with experience managing affordable housing, the statement added.